Sorry to be the bearer of bad news, but Design Therapeutics (NASDAQ:DSGN) has good intentions and less-than-stellar financials. Design Therapeutics may be a pioneer in the field of genomic medicine, and that’s commendable. Yet, DSGN stock is still likely to lose value in 2023 and might even be delisted someday.
Based in California, Design Therapeutics develops genomic medicines for genetic disorders. The company claims to have a “[r]obust pipeline of novel assets with first-in-class and/or best-in-class potential.”
That’s fine, but it doesn’t mean Design Therapeutics will deliver strong value to its shareholders this year. One can certainly root for Design Therapeutics and support the company’s potentially lifesaving research. Investing in the company is a different story entirely, though, and I simply can’t recommend it.
What’s Happening With DSGN Stock?
The first red flag here is the price action of DSGN stock. It’s the same story that you may have seen with other high-risk biotech stocks. The Design Therapeutics share price has fallen from around $30 in 2021 to just $5 and change recently.
As the old saying goes, the trend is your friend — though it can also be your enemy if you’re holding a toxic stock. Also, bear in mind that Design Therapeutics could eventually get delisted from the Nasdaq exchange if the share price falls below $1 and stays there for a prolonged period of time.
Don’t get the wrong idea here — I fully respect Design Therapeutics’ drive to advance its research programs. Just to sum them up, Design Therapeutics has programs designed to combat a “monogenic, autosomal recessive progressive disease” known as Friedreich ataxia (FA), an eye condition called Fuchs endothelial corneal dystrophy (FECD) and a neuromuscular disease known as myotonic dystrophy (DM1).
The therapies that Design Therapeutics is advancing to treat these conditions aren’t currently fully approved by the Food and Drug Administration (FDA). So, investors must face the risk that Design Therapeutics’ proposed treatments might be rejected by the FDA.
Design Therapeutics Is in Poor Financial Health
Even if one or more of Design Therapeutics’ treatments is fully accepted by regulators, this doesn’t necessarily mean the company will succeed on a financial level. Design Therapeutics has been unprofitable, quarter after quarter. This makes it difficult to properly value the company and its stock, as Design Therapeutics has no price-to-earnings (P/E) ratio since it has no earnings.
Furthermore, Design Therapeutics’ net earnings loss ballooned from $35.5 million in 2021 to $63.3 million in 2022. In addition, the company’s cash, cash equivalents and investment securities declined from $384.1 million at the end of 2021 to $330.4 million at the end of 2022.
These issues can, to a large extent, be attributed to Design Therapeutics’ spending. The company’s operating expenses grew dramatically from 2021 to 2022. Moreover, there’s no mention of cost reduction in Design Therapeutics’ most recently published earnings press release.
Don’t Risk Your Capital on DSGN Stock
Design Therapeutics has a widening net earnings loss and a declining liquidity position. Also, there’s no guarantee that the FDA will fully approve the company’s clinical programs.
Clearly, investing in Design Therapeutics is a highly risky proposition. At the end of the day, I don’t recommending buying DSGN stock. It’s liable to continue falling throughout the year and might even get delisted at some point.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.